Telefonica O2 Europe Plc & Ors, R (on the application of) v Secretary of State for Business, Enterprise and Regulatory Reform

MR JUSTICE MITTING: I have before me five applications. (1) CO/8322/2007 by Telefonica O2 Europe Plc ("O2"), T-Mobile International AG, ("T-Mobile") Orange Personal Communications Services Limited ("Orange") for permission for judicial review to challenge the validity of the Mobile Roaming European Communities Regulations 2007 SI 2007 No 1933 ("the UK Regulations"). (2) CO/8302/07 by Vodaphone Limited ("Vodaphone") to like effect. The Secretary of State for Business Enterprise and Regulatory Reform is the defendant to both claims ("the defendant"). OFCOM is joined as an interested party in each claim and each claimant is joined as an interested party in the claim in which it is not itself a claimant. (3) In both claims, by all claimants, an order requiring questions as to the validity of regulation EC number 717/2007 of the European Parliament and of the Council of 27th June 2007 ("the Roaming Regulation") to the European Court of Justice under CPR Part 86 and Article 234 of the Treaty Establishing the EC ("the Treaty"). (4) By Hutchison 3G UK Limited ("H3G") to be joined as an interested party under CPR 54.7, alternatively to make representations under CPR 54.17. (5) By the GSM Association ("GSMA") to make representations under CPR 54.17.

I deal with the last two procedural claims first. It is accepted on all sides that GSMA should be allowed to make representations and I have permitted Mr Chamberlain to do so on its behalf. The application to be joined as an interested party by H3G was initially opposed but it is not now opposed. It is based on the following propositions. First, a party directly affected by the claim may be joined as an interested party (CPR 54.1(2)(f)); "directly affected" means affected without the intervention of any intermediate agency, per Lord Keith in the R v Liverpool City Council ex parte Muldoon [1996] 1 WLR 1103, page 1105E-F. Secondly, H3G is directly affected by the imposition of price caps on wholesale and retail services, and so, by the challenge to the lawfulness of the statutory instrument passed to permit them to be enforced. These propositions are correct. There is also no sensible reason why H3G alone of all five Mobile Network Operators ("MNOs") in the United Kingdom should be excluded from participation in the proceedings.

Both of the substantive claims are a legitimate procedural device by which the underlying question of the lawfulness of the Roaming Regulation can be determined. If I am satisfied that the challenge to the validity of the Roaming Regulation is unfounded, I can and should so declare and would give effect to my conclusion by refusing permission. If I consider the issue to be arguable, I cannot determine it myself but may refer it for decision to the European Court of Justice, case C-344/04 IATA [2006] ECR 1-403, paragraphs 29 and 30. The European Court alone is competent to make such a decision. If this course is not adopted, the issue cannot be got before the European court By the claimants. It could only be litigated by one of the parties named in Article 230 of the Treaty. The European Court encourages national courts in a proper case to permit natural and legal persons to have the validity of a Community act which affects them to be determined by that court by a reference by the national court: case C-50/00P Union de Pequeños Agricultores v Council of the European Union [2002] ECR 1-6677 paragraphs 40-42.

The underlying question therefore is the validity or otherwise of the Roaming Regulation. There is no doubt that it has a significant direct and indirect affect on the business activities of the claimants. If satisfied that the challenge to its validity is reasonably arguable or, put negatively, not unfounded, I should refer the issue to the European Court and grant permission for the domestic challenge to the UK regulations.

The claimants and H3G are the five MNOs in the United Kingdom. Each provides to its retail customers packages of mobile telephony services which include the ability to use a mobile telephone overseas in and between states within and outside the European Community. Each provide overseas MNOs with the facility to permit their retail mobile phone customers to use their mobile telephones in the United Kingdom. The former is charactered in the Roaming Regulation as retail services and the later as wholesale services. Both together are known as Mobile Roaming Services. The institutions of the European Community, the Commission, the Council and Parliament have for several years been concerned to eliminate barriers to the operation of the internal market in the provision of mobile telephone services. To that end the Framework Directive 2002/21/EC of the European Parliament and the Council of 7th March 2002 ("the Framework Directive") and four specific directives of the same date were made which established a Common Regulatory Framework for mobile telephone services ("CRF"). The CRF established a harmonised regulatory framework within which national regulatory authorities are required, amongst other things, to promote competition in the provision of mobile telephony services and to remove obstacles to their provision at European level: see articles 1.1 and 8.2 and 8.3 of the Framework Directive.

A national regulator is permitted to impose specific regulatory obligations on undertakings which dominate, individually or jointly with others, a market regulated by the national regulator, which is not sufficiently competitive; see articles 14.2 and 16.3 and 16.4 of the Framework Directive. One of the markets identified in the framework directive is "The national market for international roaming services on public mobile telephone networks": paragraph 4 of annex 1 to the Framework Directive. By 2006, Community institutions had become concerned that, despite the CRF, the cost of mobile roaming services still exceeded by a large margin the cost of mobile telephone calls made and received within a single state by an MNO conducting business in that state. On 12th July 2006, the Commission published a proposal for a regulation on roaming on public mobile networks within the Community 2006/0133 (COD). The Commission proposed a price cap on wholesale services set at a multiple of the price of domestic services and a price limited at the retail level of 130 per cent of the wholesale cost (paragraph 3 of the proposal).

In the course of its legislative progress the Roaming Regulation underwent significant change but its centre piece remained the imposition of a price limit on both wholesale and retail services. Articles 3.1 and 3.2 set a maximum average wholesale charge paid by one operator to another of EUR 0.30 per-minute, falling in two steps to EUR 0.26 per-minute on 30th August 2009. Article 4.2 set a maximum retail charge paid by the customer to his MNO of EUR 0.49 per-minute for any call made and EUR 0.24 per-minute for any call received, falling in two steps to 0.43 euros and 0.19 euros respectively on 30th August 2009. The retail tariff is known as the "Eurotariff": Article 2.2(a). The object of the regulation is set out in Article 1.

The claimants seek to challenge the validity of the Roaming Regulation on 3 grounds: (1) its legal basis; (2) proportionality; (3) subsidiarity. There is some overlap between the grounds. The legal basis for the Roaming Regulation is ultimately to be found in Article 95 of the Treaty, paragraph 1 of which provides:

Mr Anderson QC for three joint claimants O2, T-Mobile and Orange, contends that Article 95 does not provide an adequate legal basis for the Roaming Regulation for two reasons. First, there are no laws et cetera in force or in prospect in Member States which require to be approximated so as to permit the free movement of services et cetera within the community. Secondly, the Regulation does not in fact have that effect. The claimants contend that the Regulation is in fact a measure to enhance consumer protections by limiting prices.

In support of these contentions, the claimants rely on the following. (1) No national laws et cetera have been identified which require to be approximated. (2) Pre-amble (1) to the Roaming Regulation identifies its true object:

In the course of oral submissions today, the proposition underlying Mr Anderson's legal argument was encapsulated by him in this way. The CRF was a justified measure under Article 95 because it had as its object the elimination of distortions in and obstacles to free market competition within the Community. The Roaming Regulation by contrast adopts, it is believed uniquely, a centralised price control divorced from Article 95 and the requirement to remove distortions in and obstacles to competition within the internal market. Accordingly, he submits, however it is to be approached, it is outwith Article 95.

Mr Turner QC for the defendant submits (1) that it is erroneous to approach the Roaming Regulation in isolation from the CRF. It was adopted to deal with an aim which the CRF addressed but did not fully achieve for Europe's businesses and citizens, "access to an inexpensive, world-class communications infrastructure and a wide range of services", set out in recital 4 of the Framework Directive. (2) The Framework Directive itself provides for review within three years. The Roaming Regulation is as a result of a belated review under that provision. (3) Although the Roaming Regulation adopts different means of achieving the end described from those required by the CRF, the aim is the same. (4) The emphasis on consumer protection does not invalidate the Roaming Regulation; on the contrary it is required by, or at least consistent with, Articles 95(3) and 153(2) of the Treaty, which provide, respectively:

Mr Fordham, for H3G, submits additionally that the imposition of Community-wide price controls is but an extension at the Community level of a power which already existed at the national level under Article 11 of the Access Directive 2002/19/EC.

The arguments of Mr Turner and of Mr Fordham are formidable arguments which may eventually prevail but they do not in my judgment achieve a knock out blow against the claimant's case. There is on any view a striking difference between the regulatory regime for roaming mobile services contained in the CRF and that provided for in the Roaming Regulation. The European Court may be persuaded that the latter is not, as pre-amble 4 to the Roaming Regulation states, a complementary and supportive measure but a radical departure. As far as I can tell, and as far as the cases referred to by counsel suggest, such a question has not arisen in precisely that form before the Court before. It is, of course, acknowledged by Mr Anderson that, in a proper case where harmonisation has already been achieved by community measures, those measures may be amended in the light of developments but, he submits, this is not such a case.

It seems to me that that is an argument which merits an airing before the European Court and does so for a number of reasons: first, the economic importance of the case to the claimants and to consumers generally; secondly, because this appears to be the first occasion on which the Community has imposed a Community-wide price cap on particular services or goods; thirdly, because it raises a question of Community law that has not hitherto been directly addressed by the court. Accordingly, I conclude that in relation to the first of the grounds of challenge to the validity of the Roaming Regulation there is a proper case to refer to the Court.

Mr Roth QC for Vodaphone submits that the Roaming Regulation is disproportionate to the aim to be achieved and offends the subsidiarity principle. The legal test is not in doubt. It set out in the two cases, case C-310/04 Spain v the Council and Commission at paragraphs 97 to 99:

I am satisfied that the first and fourth grounds are unarguable. The Community legislature was entitled to accept the advice of the Commission and of the national regulatory authorities that the CRF had not provided an adequate mechanism to achieve the stated objectives in preamble (4) of the Framework Directive. The imposition of a Europe-wide wholesale price cap at the level set was a matter of judgment for the legislature. It is not reasonably arguable that that measure was manifestly inappropriate to achieve the stated purpose. The claimed error in assessment of the size of the roaming market is not in my judgment capable of affecting the principle that a cap should be set or the level at which it should be set.

Ground 2 is, however, more soundly founded. The European Regulators Group ("ERF"), a grouping of the 25 national regulators, made submissions supported by 24 of their number on 22nd March 2006 which unequivocally expressed the view that roaming service prices were too high and should be brought down by a Europe-wide measure. It supported a uniform approach to wholesale prices but observed in paragraph 1.6 in its executive summary:

The position of the ERG was, however, consistent in both papers. Its position can fairly be summarised in its own words at paragraph 3.13 of the proposal of 22nd March 2006:

For those reasons, I grant permission for judicial review in each case. I propose to refer the questions which I have identified to the European Court. I will leave the precise wording of the questions and the supporting factual statements and documents and bundles to be addressed by counsel subsequently.

MR ANDERSON: I am very grateful, my Lord. You did see, I think perhaps even yesterday, certainly this morning, a draft order which the joint claimants submitted.

MR JUSTICE MITTING: I did.

MR ANDERSON: We updated that in one tiny respect at the back of our speaking note. The only respect in which we changed it was to remove counsel for OFCOM, who we wrongly thought was going to appear today. But you should have it in the last three pages of that note.

MR JUSTICE MITTING: Well, let us go through it. Paragraph (1), yes. Paragraph (2), yes.

MR ANDERSON: Yes, in relation to (1). Yes, my Lord, what I was going to propose -- Mr Turner will have his say afterwards -- one of course allows permission on all the grounds. (2), yes, as your Lordship says. (3), plainly the second option of those two. (4), the question will need redrafting. My proposal, just to the others, as it were, something to react to, is that perhaps there should now be two questions. The first will take the form of this one but it will stop at legal basis, so that is the vires point, and the second would say something like "is the regulation invalid or in whole or in part, so far as it concerns retail roaming, by virtue of (a) infringement of proportionality and/or (b) the principle of subsidiarity".

MR JUSTICE MITTING: Another way in which it could be done is Article 4.2 and associated articles necessary for the implementation of 4.2 invalid by reason of proportionality and/or subsidiarity but I leave that to you as a matter of drafting. I hope everybody understands what it is I wish to have referred.

MR ANDERSON: I reflected on points your Lordship raised with me right at the start of the day with Regulation 7.5 and I would hope that that is taken care of in this formulation and that both questions would begin "is the Regulation invalid in whole or in part". If somebody wanted to argue that Regulation 7.5 was saved then it would be perfectly possible to do so with that formulation.

MR JUSTICE MITTING: Yes, I was simply anxious to avoid, first, unnecessary argument before the European Court on the matter if it was not controversial and, secondly, the accidental revocation of an article that is unquestionably lawful and to the benefit of consumers within the community.

MR ANDERSON: It may be enough now your Lordship has raised the point but if the questions are phrased like that, any party who wishes to --

MR JUSTICE MITTING: Again, may I leave the detail of that to counsel to discuss and agree?

MR ANDERSON: My Lord, so far as (5) is concerned, your Lordship may be aware of the way things work in this jurisdiction. Everything goes to the Senior Master and it is generally quicker if the parties can agree what documents should go in the accompanying file and also, of course, that they should be able to agree not only the question but the short summary of what the case is about and what the arguments are. I am sure your Lordship will say that it is for parties to agree this, as indeed we have suggested here. The only comment I would make from, on the whole, a pleasant experience -- certainly always pleasant where my learned friends are concerned -- is that less is often more and there is a great deal to be said for all parties showing restraint in terms of what they are prepared to see put in and the Court of Justice, I think, has guidance of its own; it does not like these documents to be more than about ten pages, and, if everyone wants to get in everything they might want to say, then one might end up with something very much longer, but that is more to my friends than to your Lordship.

My Lord, one thing we did not deal with was the question of permission to appeal. Can I make a general remark about that before any specific applications are made, which is that the normal practice of the European Court, certainly as I understand it and I will be corrected if anybody else has a different experience, is that it is perfectly happy to accept a reference from a first instance court. If it should then happen, for reasons concerned with the national procedure, an additional question needs to be sent or a question needs to be moved or a question needs to be amended or something of that kind, well, the Court can quite happily accommodate that. But from the point of view of a case which is, certainly from our point of view, one we would like resolved as soon as possible, the appropriate course in our submission would be for -- the Senior Master has suggested in (6) to send a copy without waiting for time to appeal against the order to expire. If, in the end, somebody should grant permission and there should be an appeal and the consequence is that there is some amendment to whatever is being asked, the Court can be notified of that in due course. My Lord, I did seek authority for this over the short adjournment. Unfortunately, in the time, the only authority I was able to find was my own book. Mr Turner would say it was even worse to cite that than to cite the opinion of Sir Francis Jacob. I though of asking Mr Roth if he would cite it but that might be rather transparent. I do not want to start Mr Fordham citing his book because we would be here all night. Perhaps we will see if others agree about that. But, having made that general point, and I suspect as a matter of caution, but may I in any event formally request permission to appeal in relation to the elements of the case that your Lordship has decided not to refer. You will recall that we associated ourselves with what Mr Roth had to say about wholesale.

MR JUSTICE MITTING: I had better see if Mr Roth seeks similar permission.

MR ROTH: My Lord, yes. I expect you do not want any argument from me. It is always very unattractive to try and suggest to a judge who has just delivered a comprehensive judgment that he might possibly be wrong in any respect. All I would say is it is obviously a very important point.

MR JUSTICE MITTING: I acknowledge the diffidence which judges in this field ought to show but I still do not believe that you have viable prospects of success on the grounds that I refused to refer to the court.

MR TURNER: My Lord, I will be very brief. Mr Anderson's expedition was very helpful. On the draft order, the first point that we raise in relation to (1), "the claimants in both claims be given permission to apply", of course, in the case of Mr Roth, your Lordship has rather cut down on the grounds set out in his claim form and so there is an issue as to whether that should be reflected in the order. For our part, if it is purely a matter of form, we would --

MR JUSTICE MITTING: Well, it is purely a matter of form because everybody has acknowledged that the device, legitimate though it is of bringing a claim for Judicial Review of the UK regulations, is nonetheless a device and what matters is the reference and I have defined the questions to be referred and, as far as I am concerned, that defines the scope of the litigation.

MR TURNER: Yes, my Lord. I am obliged. In relation to the form of the reference, we shall liaise over the precise wording as your Lordship has suggested and, finally, in relation to permission to appeal, we put it rather on the same basis as Mr Roth. It is an important issue. In relation to the vires point, in particular, your Lordship has our position on it and we will formally seek permission to appeal in the event that my learned friends are doing so.

MR FORDHAM: May I just associate myself on behalf of my interested party client, now that we are a party. We also seek permission to appeal and my Lord may think there is a difference between the arguments that you were satisfied could not be at the party and those that you felt should be referred. On the basis of the arguments you have heard which I do not repeat, there is the realistic prospect of the Court of Appeal being satisfied that this is not a manifestly inappropriate measure and that the Roaming Regulation is not, given its true character, ultra vires. A realistic prospect, that is way I put it.

MR JUSTICE MITTING: Although neither of you have any locus to address that issue, you might feel it a little harsh if I were to give permission to appeal to one side but not to the other on the basis of disproportionate assessment of prospects of success.

MR ANDERSON: Yes, we would. I was not actually 100 per cent listening but if your were suggesting some injustice might be done to my client.

MR ROTH: Mr Anderson has given the answer I told him to give.

MR JUSTICE MITTING: In my view the arguments that you have advanced do have a prospect of success on appeal and the issue is of importance and, subsequently, I do give you permission to appeal but I am afraid it does not cause me to reconsider the refusal of permission to you because I think the issues you sought to raise are in a different category. If an appeal is launched by the Secretary of State and the interested party, then you will have to seek permission of the Court of Appeal to argue your grounds.

MR ROTH: Could I just ask my Lordship to make clear, following what Mr Anderson said early, that there is no reason however to delay the despatch of the reference to Luxembourg? If the appeal is pursued it might take some time. As his book makes clear, which I had a chance to look at, if the Court of Appeal should quash the making of the reference, your Lordships order, in whole or in part, then the Court of Justice respects that and then they set aside the matter. But it would be most unfortunate in a case which, as you indicated right at the beginning, was urgent if there were any delay in making the reference.

MR JUSTICE MITTING: Mr Turner, that seems to me to be a reasonable proposition. If you do take advantage of the permission that I have given you and the Court of Appeal hears the full appeal, it is likely to be at least six months, is it not, before this matter is finally determined in domestic courts?

MR TURNER: My Lord, that is right. It is a reasonable course and we do not defer from that.

MR FORDHAM: My Lord, the same for us, if we take advantage of the permission that you have kindly given to us, but we do not seek to delay reference and we do not need to cite Mr Anderson for that process.

MR ANDERSON: It is a shame, my publishers always tell me when I am cited in the court room.

My Lord, there is just one thing to tie up and again it was written right at the start of the day and it was a question of whether your Lordship might think about writing a letter. It is a very informal process. The letter could be drafted for the court. It need only be a paragraph, simply suggesting to the President of the Court of Justice that he might care to exercise his discretion under Article 55 of the rules of procedure to give the case priority, no judgment, of course, being implicit in that on your Lordship's part, and that is appropriate, but simply so that the President then has the power, if he thinks fit, to give the case a little more expedition.

MR JUSTICE MITTING: Does he not have the power unless I write that letter?

MR ANDERSON: I believe that is right. I may be corrected about this but I believe that is right. Certainly there are two types of expedition: there is priority under rule 55 and there is expedition under 104(a). I believe that before he can exercise priority, he needs to be asked by the national court. In any event, it is quite often done. It was done in the first tobacco advertising case with successful results.

MR JUSTICE MITTING: I am willing to do that and if you would draft a letter and submit it to me I will sign it.

MR ANDERSON: I am very grateful, my Lord. That leaves the question of costs. Costs were suggested to be reserved. I have not heard anybody say anything different, so may I assume that is what will happen.

MR JUSTICE MITTING: It is curate's egg and in any event it is all provisional. Yes. Certainly.

Does that conclude matters? Thank you all for your most interesting written and oral submissions.